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Lots of hot air on fixing the economy – what we need is concrete action

Lots of hot air on fixing the economy – what we need is concrete action

Earlier this week the media received an invitation from the Minister of Finance to attend and report on a consultative meeting between the ministry and representatives of the private sector.

At first I thought this was some sort of a joke, but when a reminder was sent a day later, I realised the minister must be serious. He really wants to know from business what must be done to restore the economy.

I was flabbergasted. How is it possible that the person in charge of the country’s finances could not know what is wrong with the economy, and how it must be fixed. I then suspected the consultative meeting was just some elaborate public relations exercise with a new spin on it: let the powers that be finally ask (and listen) to the people that knows how to create prosperity – and then do nothing about it.

Let me spell it out in simple terms. The GOVERNMENT is the problem. Fix the government’s stranglehold on the economy and you have solved the economy’s fundamental problems. With the government’s intrusive central control out of the way, the private sector will be able to fire the economy back to life, and do what it is supposed to do: employ people, pay salaries, make profits, pay taxes, pay shareholders. It is that simple.

But when one looks at the government and its structures, unfortunately it is not that simple.

Everybody, including the minister knows the civil service’s size, efficiency and productivity are the main culprits. Add to this the government’s ideological inclination to central control, the budget deficits, the enormous wastage, tender fraud, straightforward corruption, the bleeding parastatals, its very weak human capacity, its bureaucracy, its over-regulation and its dependence on foreign funding, and it quickly becomes obvious that we sit with a huge developmental problem and not merely a financial one.

The plan to gradually reduce the size of the civil by about 2% per year, announced late last year, is good. Now all the ministries have to do is stick to it. The related aspect of capacity and ability is much more difficult to solve. The thousands of useless government employees are not going to turn into shining innovators overnight. And while the government provides secure and guaranteed employment, who would want to leave such a cosy nest, when the bigger picture’s problems do not affect you. If you collect a paycheck every month, just for being at work (often not even being there), what incentive is there to improve your output and your level of skill.

I suspect long after the current minister is gone, the government will continue to see itself as an employment agency and not as a facilitator or governor, and the civil service will carry on just the way it were.

Of course, this has a direct bearing on budget deficits because if 40% of your operating expenses goes to salaries and wages, you will never be able to run a budget surplus, for a very simple reason: – eventually you don’t have the resources to invest in productive assets, and your growth is impeded. We are already there.

Tender fraud and corruption are very easy to root out, there must just be the political will to do so. And for that political will to become a reality, all fatcats who benefit from being connected to government officials, must be brought to justice as well. It is not insurmountable, it has been done very effectively next door in Botswana.

With the parastatals, the Cabinet must make up its mind what it wants out of the deal, and then act accordingly. Institutions like the University of Namibia, in my mind, are essential, and must not be viewed in the same way as a commercial entity. But organisations like Air Namibia, TransNamib and the Ports Authority, can easily be privatised, at least partially, and listed on the stock exchange. Think of all the secondary benefits, particularly in terms of the availability of liquid assets, that will come from listing such huge organisations. And there is a long list of government entities that can be privatised.

This bring us to the most fundamental problem with the economy, and arguably the most difficult to fix. It is the government’s ideological basis. For as long as we approach our development through communist spectacles, we shall be a failure, dependent on the hand-outs of other communists, like China.

I do not believe it is easy to change the basic tenets that guide a person through his or her life, so as an outsider, I assume the hardcore communists will go to their grave that way, and the luke-warm commies will always go for the opinion where they can score most out of the system for themselves. This brings me to the unpleasant reality that if you want to change the government’s ideological base, you will have to change the individuals in government.

And that completes the circle, taking us back to the first fundamental problem, i.e. the government as employment agency, and all the cronies that benefit, leading to only one logical conclusion: We will have ups and downs in our economy but the basic picture will not change. Our propensity to control, regulate and dish out favours, will continue to sap the economy’s real potential, and we will remain an economic basket case, living by the grace of our donors and sponsors, and in turn, handing out small favours to people who help to cement our power base.


 

About The Author

Daniel Steinmann

Brief CV of Daniel Steinmann. Born 24 February 1961, Johannesburg. Educated at the University of Pretoria: BA, BA(hons), BD. Postgraduate degrees are in Philosophy and Divinity. Editor of the Namibia Economist since 1991. Daniel Steinmann has steered the Economist as editor for the past 29 years. The Economist started as a monthly free-sheet, then moved to a weekly paper edition (1996 to 2016), and on 01 December 2016 to a daily digital newspaper at www.economist.com.na. It is the first Namibian newspaper to go fully digital. Daniel Steinmann is an authority on macro-economics having established a sound record of budget analysis, strategic planning and assessing the impact of policy formulation. For eight years, he hosted a weekly talk-show on NBC Radio, explaining complex economic concepts to a lay audience in a relaxed, conversational manner. He was a founding member of the Editors' Forum of Namibia. Over the years, he has mentored hundreds of journalism students as interns and as young professional jourlists. He regularly helps economics students, both graduate and post-graduate, to prepare for examinations and moderator reviews. He is the Namibian respondent for the World Economic Survey conducted every quarter for the Ifo Center for Business Cycle Analysis and Surveys at the University of Munich in Germany. He is frequently consulted by NGOs and international analysts on local economic trends and developments. Send comments to daniel@economist.com.na

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Paratus Namibia Managing Director, Andrew Hall

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